Most people are familiar with the way taxes are handled in a traditional job. The employer withholds a portion of the employee’s income for taxes, and when tax time comes around, their bill is offset by those withholdings. But what about dancers, whose income mostly comes in the form of tips? Do strippers pay taxes?
The IRS requires people to pay taxes on the money they earn, and dancers are no exception. The tax laws apply to cash tips too, and dancers need to know how to stay on the right side of the law. Here’s a brief guide to how paying taxes works for dancers.
Strippers and Independent Contractors
Most dancers are self-employed, which is the type of employee the IRS calls an independent contractor. Because they directly collect their earnings, they don’t have an employer keeping track of how much they make and taking out taxes from each check. Instead, they’re expected to document their earnings so they can accurately calculate how much they owe.
This makes it important for dancers to keep close track of how much money they take home. They can keep a daily, weekly, or monthly account of their earnings, but they have to stay on top of it. Apps such as Tip See and Just The Tips make it easier to log how much money they take home.
Traditional employees have money taken out of each check to meet their projected taxes. Independent contractors don’t have anyone in charge to do that, plus they also have to pay the portion of Medicare and Social Security taxes that’s usually paid by the employer. Together, this can lead to a hefty tax bill at the end of the year, so it’s generally recommended that they pay taxes quarterly. They can use the IRS form 140-ES to help them estimate their taxes.
Tips Are Taxable
When you see a dancer receiving cash tips, it’s easy to assume that’s “free money” as far as taxes are concerned. But like all forms of income, the money earned in cash tips must be reported to the IRS–and there are good reasons to be honest about that.
If independent contractors underreport their income by more than 25 percent, it’s considered tax evasion, which is a felony offense. Dancers, who usually receive the bulk of their income in cash, have a high burden to meet when it comes to proving to the IRS how much money they take home. This is why keeping an accurate log is so important. Making regular bank deposits can also be a helpful accounting tool.
Deductible Expenses
One way dancers can reduce their tax bill is by claiming deductions for business expenses. Deductible expenses are the money an independent contractor spends to be able to earn their income. These expenses may include travel costs, advertising, and costumes. In one case, a dancer was even able to claim her breast augmentation as a business expense.
The tax code is pretty vague when it comes to defining exactly what dancers are allowed to deduct. To be safe, it’s a good idea to speak with a tax expert who has experience with independent contractors, especially dancers. It’s also very important to keep good records of what was purchased and why.
See How Dancers Earn a Living in Person at Bucks
At Bucks Clubs, we respect our hard working dancers who make our clubs such a great place to be. Come enjoy our upscale atmosphere and top-notch performers. Our friendly staff are here to make your visit a great one, and our standards are very high. Stop by and see how special we make the experience!
Image source: allanswart via Gettyimages
